In the Shepperson case, the United States District Court for the District of Massachusetts addressed the “innocent co-insured doctrine” in relation to a fire loss to a homeowner in Salem.

That doctrine applies to property policies that insure more than one person. If one of them commits an intentional act that causes damage to the insured property, that insured has no coverage because the policy excludes losses caused by intentional acts. Under the innocent co-insured doctrine, however, the other innocent insured person also cannot recover under the policy. That doctrine applies to property policies that insure more than one person.

Ms. Shepperson away when the fire occurred started “accidentally” by her son

Ms. Shepperson maintained a homeowner’s insurance policy for home in Salem, Massachusetts. Her policy, which was with Metropolitan, had coverage effective from July 13, 2015, to July 13, 2016. On March 4, 2016, a fire damaged the insured premises. The fire started when Ms. Shepperson’s son, Scott, “accidentally” set the house on fire while entering inside the house with a can of gasoline and a lit match he was using to light a cigarette.

Metropolitan seeks answers through examinations under oath

Metropolitan’s policy required Ms. Shepperson to cooperate with Metropolitan’s investigation into the fire, to submit to an examination under oath, and to produce pertinent documentation and information in support of her claim.

During her examination under oath conducted in April 2016, Ms. Shepperson testified that on the date of the fire her son, Scott was living at the insured premises.

Ms. Shepperson testified that on the evening of when the fire occurred, she was visiting her brother in Holyoke, along with her daughter and two grandchildren. She first learned about the fire loss from a call that night from Scott, who said that as he was walking through the house, he smelled gas and it appeared that the gas can was leaking. According to Ms. Shepperson Scott told her that “[h]e took a cigarette out of the package, put it in his mouth, walked through the back hall, took a kitchen match, lit the match and was walking out to the deck to light his cigarette . . . when he struck the match, . . . the place exploded.”

An independent fire expert in cause and origin analysis, hired by Metropolitan, found the fire had originated on the first and second floors of the insured premises and that there were at least eight separate points of origin. The independent expert advised Metropolitan that the fire was incendiary in nature.

Metropolitan sought to have Scott submit to an examination under oath, but he failed or refused to appear on the date Metropolitan had scheduled. He also failed or refused to produce the pertinent documentation requested from him by Metropolitan relating to the fire investigation.

In September 2016, based on the results of its investigation, Metropolitan notified Ms. Shepperson that it had determined her claim was not a covered loss under the clear and unambiguous language of the policy. Metropolitan based its decision upon its determination that the subject fire was intentionally set by Scott, who was a “resident” of the insured premises at the time of the subject fire.

Unambiguous exclusion for intentional acts of a relative resident in insured premises

The “clear and unambiguous” language in its policy Metropolitan relied upon excluded any “Intentional Loss, meaning any loss arising out of any intentional or criminal act committed:

by you or at your direction; and

with the intent to cause a loss.

This exclusion applies regardless of whether you are actually charged with or convicted of a crime.

In the event of such loss, no one defined as you or your is entitled to coverage, even people defined as you or your who did not commit or conspire to commit the act causing the loss.

The policy defined “You” or ‘Your” to mean:

The person or persons named in the Declarations and if a resident of the same household:

The spouse of such person or persons;

The relatives of either or;

Based on Scott being a resident of the insured property and the son of the owner, his intentional act in burning down the property, if proven, barred Ms. Shepperson from recovering under Metropolitan’s policy for her property loss even though she “did not commit or conspire to commit the act causing the loss.”

Judge finds the policy would exclude coverage, except the coverage exclusion is illegal

Ms. Shepperson sued Metropolitan in the Essex County Superior Court, but Metropolitan removed the suit to the United States District Court in Boston.

In Federal court, both Ms. Shepperson and Metropolitan moved for summary judgment. Metropolitan claimed its policy exclusion on intentional acts by insureds prohibited any recovery if the loss arose from an insured committing arson. Ms. Shepperson claimed that the exclusion could not bar recovery of an innocent insured, such as herself, under the standard form fire policy form required by Mass. Gen. Laws c. 175, § 99.

This statutory section states:

No company shall issue policies or contracts which, . . . insure against loss or damage by fire…to property or interests in the commonwealth, other than those of the standard forms herein set forth [inapplicable exceptions omitted].” G.L. c. 175, § 99.

The judge stated the question presented was whether Mass. Gen. Laws c. 175, § 99 assures property damage coverage for an innocent named insured when an unnamed co-insured resident of the premises they share intentionally sets those insured premises afire.

In making his decision, the judge noted, “The clear trend has been in favor of allowing innocent co-insured coverage.” He noted the language of the policy states that “no one defined as you or your is entitled to coverage, even people defined as you or your who did not commit or conspire to commit the act causing the loss.” This language is clear and unambiguous. The provision suspends coverage for all insured parties—even those who were innocent of any wrongdoing—when any insured party causes an intentional loss.

However, the judge stated the issue is not whether the policy language is clear, but rather whether the policy provision complies with the mandate of Mass. Gen. Laws c.. 175, § 99. He concluded the exclusion, while clearly expressed, appeared prohibited in Ms. Shepperson’s circumstance by §99.

Judge rules Metropolitan must pay loss as Ms. Shepperson was an innocent insured

The record before the judge showed Ms. Shepperson was away from the insured premises at the time of the fire and that she had no involvement in causing the fire. Metropolitan produced no evidence to suggest otherwise and did not even bother to ask about her involvement during her examination under oath.

To the judge, whether Scott’s actions that resulted in the fire were accidental or intentional was of no consequence to Ms. Shepperson’s claim, given her lack of involvement in the fire and consequent lack of any intent, actual or constructive, to cause it.

On the evidence before him, the judge found as a matter of law that Ms. Shepperson was an “innocent insured” and based on the terms of the standard policy statute, M.G.L. c. 175, § 99, the judge further found Ms. Shepperson, as an innocent insured, was entitled to summary judgment against Metropolitan on her breach-of-contract claim.

A summary of the holding of the Federal District Court

In short, the Federal Court held that an insured homeowner could not be denied coverage for a fire loss even if the fire was set by another household member who is an insured on the homeowner’s policy, as long as two conditions are met:

first, the homeowner did not participate in the arson;

second, the household member was made an insured by the operation of the policy language, such as a definition of insureds that includes any relatives who are household members, rather than by a conscious decision to make them an insured listed by name on the policy.

About Nina Kallen and her blog Insurance Coverage law in Massachusetts

Nina Kallen has been an attorney in Massachusetts since 1994. Her practice focuses mainly on general litigation and in particular insurance coverage issues. You can learn more about her, and find links to her published opinions, at www.kallenlawyer.com.

About Owen Gallagher

Owen Gallagher is an experienced insurance litigator as well as a certified mediator and arbitrator who specializes in insurance industry disputes. His interest and affinity for insurance began at a young age working the counter at his father’s assigned risk agency in Roxbury. Over the course of his career, Owen has argued a number of cases in the Massachusetts Supreme Judicial Court and has helped agents, insurance companies, and lawmakers alike with the complexities and idiosyncrasies of insurance law in the Commonwealth. Owen can be reached here.

The mother’s suit was a civil matter any charges against the son would be criminal. The two proceedings are independent legally. Metropolitan would have reported this in the ordinary course of business to the Insurance Fraud Bureau. Then it is up to the Bureau to refer it local or state prosecutors if there is sufficient evidence. Those prosecutors do not accept every referral for prosecution and there was nothing I found indicating any criminal charges had been filed as a result of this fire.

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